An Escrow Officer at our company opened an escrow that was a For Sale By Owner (FSBO), meaning the seller did not use a real estate agent to market and sell the property. In this instance, the buyer also did not use a real estate agent.

The seller entered into a sales contract with a buyer (the “Contract Buyer”) for $142,000. The Contract Buyer then entered into an assignment of contract to the ultimate buyer (the “Ultimate Buyer”) for an $18,000 assignment fee. The Ultimate Buyer was an investor who would renovate the house and then re-sell the property.

The seller told the Escrow Officer why she was selling the home: One day, she went home and discovered someone had broken in and ransacked it. She left the house so quickly that she did not take her purse or any identification. She was afraid to go back to the house to retrieve them and so she had no identification.

The seller said she did not want to ever go back and that is why she was selling. The Escrow Officer also noticed that when the seller called, the name on the caller ID was someone else’s — not the seller’s name. This raised a red flag, and the Escrow Officer became suspicious about the transaction.

The contract called for an early release of earnest money in the amount of $3,000. The seller told the Escrow Officer that she closed all her accounts due to the home being broken into and she needed the Escrow Officer to send the funds to her friend’s account.

The Escrow Officer told the seller she could not do that, so the seller asked to have the funds transferred to her Venmo account. The Escrow Officer told her she could not do that either. The seller said she really needed the money and would cancel the escrow if the Escrow Officer did not get her the cash.

The Escrow Officer told the Contract Buyer about the conversation and warned him to verify the identity of the seller. She told him every time she talked to the seller, there were more red flags. The Contract Buyer ended up transferring the $3,000 directly into the seller’s Venmo account so he would not lose the deal.

Finally, it was time to have the seller sign the closing documents. However, she would not allow the Escrow Officer to arrange for an approved signing agent to go to her house and reiterated that she still did not have any identification.

The seller said she had no idea who ransacked her house and did not trust anyone, so she did not want to meet with anyone for the signing. The Escrow Officer told her a Company approved notary must conduct the document execution. The seller absolutely refused and said she would only feel comfortable if a friend, who is a notary, did the signing. The Escrow Officer argued she could not accept her friend’s notarization unless her friend was a notary approved by our Company.

The Escrow Officer told her the friend could be there with her — along with the Company approved notary — but the seller refused that, as well. At that point, the Escrow Officer felt there were too many stories and too many things that did not add up.

The Escrow Officer told the Contract Buyer, who had directed the transaction, that she would not accept anything less than a Company approved notary conducting the signing and would not close unless she could get the Department of Motor Vehicles to verify that the seller’s ID was valid. She warned him this transaction had red flags of fraud and she was ready to resign as the Escrow agent.

A day later, the Contract Buyer reported to the Escrow Officer that he had talked to a representative at a competitor Title Company and they would accept the seller’s friend’s notarization on the closing documents. As a result, they were going to transfer the deal to the other Title Company.

The Escrow Officer cancelled the transaction file.

Two weeks later, the Contract Buyer called the Escrow Officer. The competitor closed the deal and never even checked to see if the friend was a valid notary. As it turned out, the notary stamp was fraudulent, and the seller turned out to be an imposter!

By this point, the Ultimate Buyer had removed everything from the house, ripped the kitchen out and started the rehab of the property. The actual property owner went to the house and found the Ultimate Buyer working in the property and asked where all her things were. The Ultimate Buyer informed her he threw it all out.

The actual property owner said her husband’s ashes were in the house and she was going to sue everyone associated with the sale for punitive damages. The competitor Title Company is now in the process of attempting to unwind the sale and reinstall the kitchen. This poor owner, however, will never get her husband’s ashes back.

Moral to the story… Our Escrow Officers are trained to detect and prevent fraud which ultimately protects you!

 

by Jill Bright, Chicago Title Agency